Case Study of reaching GIPs Compliance and the Independent Verification
A London based firm wished to utilise the performance of their fund range to attract clients to increase the number of segregated mandates they were managing. The fund range had been increased by the acquisition of another firm with some overlap of historical fund's performance. The starting point was at the takeover of the funds so as to define the firm scope as from this point in time forward for showing track records. ISC were brought in to help with the project that needed to review what would be required to meet GIPs compliance and allow the track records of the fund composites to be used in sales pitches to consultant and potential clients.
ISC put together the project plans and established the governance not only for the project but beyond into the stage when the form would be verified as complaint. The working group set about the actions necessary to gain compliance based on a gap analysis document created by ISC. The actions covered consistency of data between funds under management and the performance data used to ensure that the information that would be used for marketing could be reconciled. ISC supplied templates for storage of the data that led to the additional information for the composite library. The analysis also added recommendations for areas where the firm should look to change in the future to make the process controls more robust and evidence of meeting GIPs standards.
The project took around 4 months to bring the necessary processes to a level whereby the verification exercise could be performed. The scope during the early phases covered the client and fund documentation testing the firm's storage controls, the rules for meeting each portfolios restrictions with the controls for updates and authorisation as well as the delivery of the valuation of the assets that created the performance values. Once these had all been reviewed the creating and checking of composites was initiated ensuring consistency across use of benchmarks and the underlying performance to tackle any outliers.
The governance models both for the project and beyond into the verified state were able to monitor the progress towards reaching GIPs compliance. The budget controls of ISC meant that the project delivered within costs and the timeframe agreed. The next stage was to engage with the verifiers to explain the scope and the stage of any marketing activity which to date had not included any reference to GIPs. This meeting although between ISC consultants was based on a level of independence to ensure that the verification exercise was completed to the same standard as if an external party had been used.
ISC verifiers requested the set of data required to review the firm in order that the off-site review stage could be completed. Although the requests were sent through the project ISC consultant he made sure each area of the business actually supplied the information where possible. The review stage uncovered a number of questions and areas that needed to be covered in the on-site stage so the dates for this were arranged making sure key people within the firm were available. Meetings were set up for the 3 days, office visit for the 2 verifiers from ISC. The meetings gave the verifiers a greater understanding of the firms' controls and activities.
At the completion of the verification exercise a recommendation report looking at areas for the firm to focus on was issued. This report would be used for the next annual visit to monitor the progress of maturity of the operating model in line with the standards. The content of the recommendation report was then matched with the analysis completed during the project and each area had been actioned identically. This information had not been shared until the close out meeting and illustrated the value of using experienced consultants who understand the end to end operating model enabling them to support firms in their reaching and maintaining of GIPs Compliance.